The technology and software industry is at the vanguard of innovation and progress — it has facilitated global connectivity and reshaped modern life. Now, it faces a complex new challenge: decarbonizing. While the industry is sometimes perceived as a minor player in climate because it is “asset-light,” in reality, its carbon footprint is substantial.
Before companies in the sector can effectively decarbonize, they need a comprehensive understanding of where their emissions come from. As a starting point, Persefoni created an emissions profile for the industry, based on our analysis of data from the CDP (formerly Carbon Disclosure Project), the world’s largest database of carbon emissions reporting.
Below, we’ll examine typical emissions sources in the tech and software sector and outline the steps companies can take to calculate and manage their carbon footprints.
What is an Emissions Profile?
An emissions profile provides a roadmap for understanding your carbon footprint.
One of the first steps in a carbon accounting journey is identifying which emission sources you need to track to measure your footprint accurately in line with industry best practices. An emissions profile helps answer this question, by showing typical emissions-producing activities in the sector. It serves as an initial guide that allows you to see which business activities may contribute to your company’s carbon inventory — and helps you understand the financial and operational data you’ll need to complete robust, audit-grade carbon accounting.
When you’re armed with a comprehensive understanding of your footprint, you can identify emissions hotspots and make more efficient reductions — accelerating progress on climate goals. This journey begins with identifying which activities are likely worth measuring. We’ll dig deeper into the specific emissions profile for tech and software later in this article.
The Tech and Software Landscape
The sector is under pressure to decarbonize.
Today, nearly every industry is grappling with how to respond to the climate crisis — and tech and software are no exception. Consumers, investors, and other stakeholders are demanding increased transparency about climate impacts and sustainability efforts. Meanwhile, severe weather, changing markets, and an evolving regulatory landscape pose new risks and opportunities for tech companies. There’s no question that decarbonization is a pressing need. Here’s a closer look at some of the factors changing the playing field for this sector:
Risks
- Physical Threats: Because the tech industry relies on physical infrastructure like data centers and the power grid, it is vulnerable to extreme weather events. In several cases, extreme heat has led to the shutdown of data centers — a worrisome trend. Climate change poses an imminent threat to these assets.
- Consumer Sentiment: Growing consumer awareness and concern about environmental issues are pressuring tech companies to adopt responsible practices and showcase their commitment to sustainability. Those who fail to respond could risk their reputations and market share.
Opportunities
- Climate Action Facilitation: Technology companies can leverage their resources and expertise to accelerate climate action. New climate tech companies are emerging each year, with innovations that promise to help drive down greenhouse gases.
- Sustainability as a Business Strategy: Embracing sustainable practices offers tech companies a competitive edge, appealing to environmentally conscious consumers, potential employees, and investors.
Pressures
- Decarbonization: The global movement towards achieving net-zero emissions or carbon neutrality directly affects the tech sector. In addition to cutting emissions in their operations and supply chains, companies can explore options such as purchasing Renewable Energy Certificates (RECs) to offset scope 2 emissions from indirect energy consumption.
- Stakeholder Demands: Regulators, investors, and customers increasingly demand climate action and transparency, making sustainability reporting and emissions reduction plans a financial imperative for tech companies.
What Does the Emissions Profile Look Like for Tech and Software?
Hardware components can drive up emissions.
While the tech industry generates fewer emissions than manufacturing-heavy sectors, its carbon footprint is still relevant. Emissions in this industry come from a variety of processes and sources up and down the value chain.
Below, we outline common contributors to material emissions in tech and software In this context, ‘material’ refers to sources that likely account for at least 5% of total GHG emissions in scope 1, 2, or 3 categories.
This emissions profile is based on Persefoni’s analysis of carbon benchmarking data from the CDP, an organization that gathers annual voluntary climate reports from companies worldwide. It is intended to help you understand the business activities that may make up your carbon footprint and to provide a roadmap for more comprehensive carbon accounting.
Scope 1 & 2 Emissions
Scope 1 and 2 emissions tend to contribute less to a company's overall carbon footprint in the tech and software sector.
Scope 1 Emissions
This category of emissions tends to be comparatively low in the tech and software industry, as these companies often do not have extensive manufacturing operations. Scope 1 emissions typically stem from energy consumption from on-site facilities, including offices, data centers, and manufacturing plants, as well as fuel combustion from company-owned vehicles and equipment.
Scope 2 Emissions
Scope 2 emissions are often more substantial than scope 1. In this sector, material emissions sources typically include electricity consumption for powering data centers, office spaces, and other facilities, as well as emissions associated with purchased heating or cooling.
Scope 3 Emissions
Scope 3 is almost always the most material in this sector. It includes the emissions from operating cloud data centers, purchased goods, waste, and employee travel. There may be other company-specific nuances as well, but generally, the emissions outlined below will be the most relevant.
Upstream Emissions
- Purchased Goods and Services: These can be an important source, particularly in hardware procurement for servers, computers, and other tech equipment, and cloud computing services like AWS.
- Capital Goods: Investments in technology infrastructure can add considerably to your carbon footprint.
- Business Travel: Business travel emissions from employee commuting, business trips, and other travel-related activities.
Downstream Emissions
- Use of Sold Products: If you produce hardware, emissions associated with the use phase of your products can be extensive.
- End-of-Life Treatment: Disposal and recycling of electronic products also contribute to downstream emissions.
A Key Difference: Hardware Components
The emissions profile of different sub-industries within the sector reveals an important distinction: the presence or absence of a hardware component. This factor fundamentally shapes a company’s environmental impact, influencing the nature and magnitude of emissions across various scopes.
With a Hardware Component
Companies like Apple that produce a hardware component will generally have a larger footprint. The manufacturing processes associated with hardware add substantially to both scope 1 and 2 emissions. Downstream scope 3 emissions can also be notable, particularly when it comes to the end-of-life treatment of sold products.
Without a Hardware Component
In contrast, companies lacking a hardware component tend to report lower direct emissions (scopes 1 and 2) than their hardware-centric counterparts. Yet scope 3 emissions persist — primarily from cloud services and other purchased services and goods.
What’s Next? A Playbook for Calculating Emissions
A step-by-step approach to assessing your footprint.
Tech and software companies are under pressure to provide transparent, reliable, traceable data about their climate impacts. An emissions profile is just a starting point. To meet the demand from stakeholders and regulators for high-quality data, companies will need to conduct robust carbon accounting.
Below, we outline a step-by-step approach to getting started.
1. Create a Project Management Plan
- Designate a project leader: Appoint a dedicated individual to lead your GHG inventory project. This person should have the authority, knowledge, and resources to drive the effort effectively.
- Secure buy-in: Ensure top-level management supports the strategy, as their backing is crucial for resource allocation and project success.
- Set internal deadlines: Establish clear timelines for each phase of the project to maintain momentum and accountability.
- Develop an IMP: Create a detailed Inventory Management Plan (IMP) that outlines procedures and methodologies for data collection, calculation, and reporting. This plan should be regularly updated to reflect any changes in operations or reporting standards.
- Ensure consistency: The IMP should establish consistent and repeatable processes for each reporting period. Automated carbon accounting software can ensure consistency and transparency.
2. Identify and Assess Emission Sources
- Review potential sources: Examine all possible emission sources as outlined by the GHG Protocol. This includes direct emissions (scope 1), indirect emissions from purchased energy (scope 2), and all other indirect emissions (scope 3).
- Assess materiality: Materiality thresholds will vary for each company, so you’ll need to conduct a thorough assessment following relevant guidance for your industry and regulatory jurisdiction.
- Create a checklist: Develop a Footprint Source Checklist detailing all material sources identified for tracking and data collection.
3. Gather Emissions Data
- Assign data owners: Identify individuals responsible for collecting data for each emission source. These could be department heads or facility managers.
- Set data collection deadlines: Ensure timely collection of data by establishing and communicating clear deadlines.
- Collect data: Each category of data will present different challenges. Scope 1 and 2 data will generally be straightforward as they rely on internal energy consumption data, while scope 3 often requires engagement with hardware suppliers, analysis of employee commuting patterns, and considerations for product end-of-life treatment. You can start by identifying top suppliers and understanding the carbon intensity of your raw materials.
- Conduct quality assurance: Designate a person or team to review the collected data for accuracy and completeness.
4. Collaborate for Better Data
- Engage suppliers directly: You should work closely with suppliers, especially those providing cloud services, to understand (and ultimately reduce) their carbon footprints. You’ll want to communicate with suppliers to gather detailed data, understand their processes, and set expectations for future improvements. Using the same shared carbon accounting software can make this process easier.
- Seek Product Carbon Footprint (PCF) data: You’ll want to obtain detailed emissions data for all purchased goods, particularly tech hardware. For a higher level of accuracy, you should gather Product Carbon Footprint (PCF) data, which measures the total emissions created by a product over its lifecycle.
- Incentivize emissions reductions: Use the collected data to source preferentially from lower-emission companies and encourage suppliers to adopt practices that reduce their carbon footprints.
Conclusion
The world often looks to the technology and software industry to innovate solutions to our most pressing problems. In the global race to drive down carbon emissions, the sector has a pivotal role to play. That starts with actively managing its own emissions. Tech and software companies need to thoroughly understand their carbon footprints so they can prioritize reductions and reach their climate goals faster — paving the way for others to follow.
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